Centro grasps at last-minute restructure

Centro chief executive Robert Tsenin had indicated this week he would not budge on key components of the restructure plan to satisfy investors’ demands.
Photo: Josh Robenstone

Centro hopes an 11th hour compromise will win over investor support for a $7 billion rescue plan for its stricken property empire.

The shopping centre landlord rushed to court on Friday afternoon to get approval for changes to the existing deal. The proposal has been recut to give Centro Retail Trust investors a better piece of the action in the new Centro Retail Australia fund.

Investors and creditors are due to vote on schemes to amalgamate Centro’s various vehicles into the new trust on November 22.

A group of local and offshore funds on the Centro Retail register have threatened to vote down the deal. At least one investor, New York-based Marathon, has already directed its proxies against the restructure. There is still time before Tuesday’s ballot to reverse that direction or to override it by a vote on the day.

As the clock counted down, Centro Retail advisers UBS hammered out a revised deal with the parent’s adviser, Moelis, and with Centro’s senior lenders.

Under the compromise, Centro Retail investors maintain their net tangible asset backing of around 44¢ on their existing units. Net asset value increases to 47.3¢, including the value of the Centro’s management platform.

The improvement is achieved by a 100 per cent Centro write-down on a $90 million inter-company loan to Centro Retail, which supports its economic interest in a Melbourne shopping centre.

In another concession, the cap has been dramatically lowered on a controversial plan to issue top-up shares compensating for any potential litigation payouts.

The effect of that change is to diminish any subsequent dilution to Centro Retail investors in the shake-out from the ongoing litigation.

Under the revised deal, external investors in Centro Retail – Centro itself holds a 51 per cent stake that cannot be voted next week – will increase their slice in the new vehicle by about 10 per cent, to 15.9 per cent. Some had held out for a 30 per cent upgrade.

Local investor Orbis Funds holds around 3 per cent in the retail trust. Chief executive Simon Marais was heartened by the improvement to NTA while still wary about the exposure to unresolved lawsuits.

“We’ll look at the deal when it comes,” he said.

The Australian Financial Review

Correction

An earlier version of this story incorrectly said under the revised deal, external investors in Centro Retail will increase their slice in the new vehicle by between about 10 and 15.9 per cent. It should have said by 10pc, to 15.9pc.